FX.co ★ IMF calls for targeted aid and firm central bank policy to preserve economic buffers

The global economy has shown remarkable resilience to a string of shocks, but its buffer is running out, IMF Chief Economist Silvana Tenreyro said. She argued that countries must shift from ad hoc crisis responses to a planned recovery, rebuilding fiscal space and strengthening supply‑side resilience.

Tenreyro identified rising borrowing costs and mounting debt‑servicing expenses as the principal danger. If governments do not rein in deficits, interest payments could crowd out vital spending on social services and infrastructure, leaving states without reserves to withstand future shocks. She called for immediate fiscal consolidation and stressed that any government support should be strictly targeted and temporary.

The IMF official also highlighted the role of central banks. Regulators should maintain sufficient policy firmness to return inflation to target and anchor price stability. Premature easing of financial conditions risks rekindling inflationary pressures. The IMF believes that only a combination of disciplined fiscal policy and measured central bank action will enable the financial system to weather the challenges ahead.